Is This The Much Needed Lifeline Oil & Gas Companies Are Looking For?

The Walking Dead have been a popular drama series over the past few years. It?s a show about a group of people trying to survive in a zombie-infested world. In the context of Singapore?s stock market however, it is perhaps more apt as a reference to the current state of the oil & gas companies listed here.

Many of those companies are facing high debt levels and declining revenues. Companies such as Ezra Holdings Limited (SGX: 5DN), Ezion (SGX: 5ME), and to a certain extent even former blue chip stock Sembcorp Marine Ltd (SGX: S51), are struggling with their finances.

There have already been cases of oil…

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The Walking Dead have been a popular drama series over the past few years. It’s a show about a group of people trying to survive in a zombie-infested world. In the context of Singapore’s stock market however, it is perhaps more apt as a reference to the current state of the oil & gas companies listed here.

Many of those companies are facing high debt levels and declining revenues. Companies such as Ezra Holdings Limited(SGX: 5DN), Ezion (SGX: 5ME), and to a certain extent even former blue chip stock Sembcorp Marine Ltd(SGX: S51), are struggling with their finances.

There have already been cases of oil & gas companies throwing in the towel and filing for bankruptcy restructuring – a good example is Swiber Holdings Limited(SGX: BGK).

The weakness in the oil & gas space is also spooking investors’ confidence in Singapore’s banks such as DBS Group Holdings Ltd(SGX: D05) and Oversea-Chinese Banking Corp Limited (SGX: O39). The local banks have been experiencing higher default rates from their oil & gas clients.

The dire situation for oil & gas companies in Singapore has reached a point where the government has decided to step in.

The Ministry of Trade and Industry (MTI) just announced last week that it will be providing financing support for the marine and offshore engineering companies in the country to weather through the current storm. There will be two financing schemes.

According to MTI, marine and offshore engineering companies could borrow up to S$5 million each under a bridging loan (BL) scheme for a tenure of as long as six years. Within a borrower group, the total credit limit would be S$15 million.

The other scheme is the IFS (Internationalisation Finance Scheme), which provides financing for projects and assets. Under the IFS, a borrowing group has a borrowing limit of S$70 million, up from a previous ceiling of S$30 million.

The government will be taking on 70% of the risk-share for both schemes.

Here’s what the MTI has this to say with regards to the new financing support:

“Some industry consolidation is inevitable as companies restructure and adapt to the challenging environment… …These targeted measures aim to help preserve the marine and offshore engineering industry’s core capabilities, which have been built up over the years and will be important to seize future opportunities.”

The announcement should come as good news for many of the companies within the marine and offshore sector. Now that the government has thrown a lifeline to them, it is up to those companies to use the opportunity and restructure their business in order to become more resilient in the future.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any companies mentioned.

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